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ENERPO NewsletterVolume 3 Issue 6
21st October 2016
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Turkish Stream Turkey looks forward to more available supply. Read More
Kiwi Oil and Gas New Zealand explores high risk operations. Read More
Cap Opposition Russian companies not ready for production cuts. Read More
Week in Review
Energy News Blog
New Unconventional Fuel: Gas Hydrate Development in Pacific Raises Questions – Aaron Wood
Gas hydrates could open up a new fuel source for import-dependent countries like Japan. Exploration of new opportunities is already underway, but comes with caveats. ENERPO student Aaron Wood reports. Read More
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Kelsey Zimmerman, Daniel Tsvetanov, Alberto Perego, Elisabeth Nguebana, Glenda Pavon, Bogdan Polishchuk,
Alexander Geysman
Rosneft in India New assets in South Asia. Read More
Well Decommissioning North Sea rigs no longer profitable. Read More
BidsIran opens to foreign companies. Read More
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Fukushima I nuclear power plant before the 2011 explosion. by KEI, CC BY-SA 3.0,
ENERPO NewsletterVolume 3 Issue 6
21st October 2016
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New Unconventional Fuel: Gas Hydrate Development in Pacific Raises Questions – Aaron Wood
Following the Fukushima disaster in 2011, Japan has been seeking to convert its traditionally atomic electricity genera-tion capacities to fossil fuels in the interest of safety from nat-ural disasters, deciding to maintain a baseload of only 20 to 22% in the energy mix from nuclear power plants until 2030. Lacking the resources to generate necessary power at home, Japan’s net energy imports as a percentage of total energy used increased from an already high level of 80% in 2010, to 94% in 2014. The sudden jump in reliance on gas for electrici-ty generation is reflected in Japan consisting for over a third of global LNG demand in 2012.
Recently Japan has been exploring the opportunity to supply its growing reliance on hydrocarbons domestically via the offshore harvesting of gas hydrates, despite the glut in oil prices dampening the need to search for alternative fuel sources. Gas hydrates are a crystalline, ice-like form of water in which non-polar molecules are encased in hydrogen-bond-ed, frozen water molecules. Many such crystalline structures, nearly 1,100 bcm worth, have been found off the southeast coast of Japan. Over the course of the last three years, Japan has shown significant interest in developing gas hydrate resources, conducting test operations in 2013 by Japan Oil, Gas and Metals National Corp. (JOGMEC), until sand shifting on the ocean floor halted operations. Last summer JOGMEC returned to continue work on the site.
The prospect of unlocking another energy source in coastal waters has proven appealing to other players as well. A cooperative scientific expedition with scientists from the United States, India, and Japan has recently discovered large deposits of gas hydrates in the Indian Ocean. India, in an effort to shift away from coal, is searching for alternative energy sources and could supply its gas needs with domestic hydrate production, while American companies stand to expand their export capacities with the addition of yet another unconventional source of gas production.
While some are hailing gas hydrates as a fuel of the future, many are quick to note the environmental effects of not only the gas once it is burned, but the effects of the extraction itself. Gas hydrates contain a variety of different gases. Throughout the processing, burning, or dissolution of these hydrates it is quite possible for these gases to escape, some of which, such as CH4, are more effective greenhouse gases than even CO2. GNS Science, a New Zealand science consultancy firm, is quick to note that dissolving or “melting” gas hydrates could not only affect the atmosphere once gas is released, but also influences the stability of ocean floors. Premature or excessive dissolution of gas hydrates could result in shifts on the ocean floor, which in turn could influence waves patterns, coastal stability, erosion, and even weather patterns.
The IEA has voiced its concern for Japan’s increasingly carbonized energy mix. Not only will more emissions fly in the face of Japanese commitments to the COP21 agreement made in January, but the increased reliance and consumption of fossil fuels has led to unsustainably high prices on the Japanese domestic market, hitting the pocketbooks of
Japanese consumers. The IEA has called for a return to nuclear energy in addition to scaling up Japan’s renewable energy commitments.
This puts the country’s leadership in a tricky position. Increased carbonization is undesirable to environmental activists and economists alike, while the Japanese public at large still remains opposed to returning to nuclear energy, as the memory of the Fukushima disaster and its fallout still remain persistent. Polls of the Japanese public have found that 53% of respondents favored a decrease in nuclear energy, while 20% preferred to abolish it altogether. Conversely, the Mizuho Information & Research Institute of Japan conducted a survey
Energy New Blog
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Figure 1: Japan Energy Imports (% of energy use)Source: World Bank
ENERPO NewsletterVolume 3 Issue 6
21st October 2016
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asking respondents whether they would favor nuclear energy use if it meant their energy costs were the same or less than they would otherwise be that month. 67% answered “yes” while 32% answered “no”.
Moving forward, Japanese leadership will have to balance the varying interests at home, as well as those of potential partners in developing the gas hydrate resources, as foreign countries and inevitably, foreign companies, get involved in the process. As of yet, research is still being conducted regarding the viability and environmental safety of gas hydrate production. At best, it could be a convenient new source of transitionary fuel, and at worst, another environmental catastrophe waiting to happen.
FEPC, 2016. Japan’s Energy Supply Situation and Basic Policy. FEPC. Accessed: 20 October, 2016.
IEA Statistics, 2014. Energy imports, net (% of energy use). The World Bank. Accessed: 19 October, 2016.
Chee Yew Cheang, 2016. Japan Progresses Methane Hydrate Project, Ignores Industry Downturn. Rigzone. 11 July, 2016.
Sonal Patel, 2016. Gas Hydrates: Fuel of the Future? Powermag. 5 January, 2009.
GNS Science, 2016. What are Gas Hydrates? GNS Science. Accessed 19 October, 2016.
IEA, 2016. IEA urges Japan to decarbonise its energy supply. IEA. 21 September, 2016.
World Nuclear Assocation, 2016. Nuclear Power in Japan. World Nuclear Association. Accessed 20 October, 2016.
Figure 2: Nuclear power stations in Japan
suspended active planned
The Week in Review
ENERPO NewsletterVolume 3 Issue 6
21st October 2016
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Turkish Stream to Move Ahead
During his official visit to Turkey, Russia’s President Vladimir Putin announced a revival of the Turkish Stream pipeline project. The new pipeline would run under the Black Sea to Turkey before continuing onwards to Greece, enabling Russian natural gas colossus Gazprom to deliver natural gas to the European markets while avoiding the use of existing pipelines in Eastern Europe. This would enable the company to potentially cut off gas supplies from neighboring countries like Ukraine without jeopardizing supply to European customers. Russia has been attempting to build such a pipeline since another potential pipeline through Bulgaria was blocked at the behest of the European Union after the onset of the Ukrainian crisis. The chief executive of Gazprom, Alexei Miller, had said that the agreement foresees the construction of two pipelines on the bed of the Black Sea. One line with a capacity of 15.75 bcm meters would supply the Turkish market while the other would carry gas to Europe. Construction could start by the end of 2017 with the estimated completion date of the first pipeline in 2019. Turkey, the second biggest consumer of Russian gas after Germany, imports around 30 bcm/y through two existing pipelines, the Blue Stream, which passes under the eastern Black Sea, and the Western Line through the Balkans. With the new Turkish Stream pipeline, Gazprom would reduce the price of natural gas sold on Turkey’s domestic market.
Neil MacFarquhar, 2016. Warming relations in person, Putin and Erdogan revive pipeline deal. New York Times, 11 October, 2016.
Daily Sabah, 2016. Erdogan, Putin sign agreement on Turkish Stream gas pipeline project. Daily Sabah, October 10, 2016.
The Week in Review
Oil and Gas Development plans in New Zealand
New Zealand has begun exploration in the Canterbury Basin off the Eastern coast of South Island. The Barque prospect, where the test wells will be drilled, is estimated to hold 530 million bbl of crude oil equivalent. New Zealand is not a popular hydrocarbons exploration region, because it is generally considered a high investment risk by international major oil companies. According to the article however, "NZOG is optimistic, however, with chief executive Andrew Jefferies saying the block could yield a “game-changing” find for the whole region."
Irina Slav, 2016. New Zealand Company to Drill in Risky 530M Barrel Deposit. Oilprice.com. 14 October, 2016.
Igor Sechin Opposes the OPEC Oil Deal
Russia’s most influential oil executive and the head of Rosneft, Igor Sechin, said his company will not cut or freeze oil production as a part of a possible agreement with the Organization of the Petroleum Exporting Countries. Rosneft is not the only Russian company that express opinion against the official Kremlin position to join the production cut, which was reported on last week. Moreover, heads of Lukoil and GazpromNeft commented that the production freeze is technically possible, but they are not ready to consider this option, because it will lead to decline in future production. Sechin doubted that all of the significant players, namely Iran, Saudi Arabia and Venezuela, would cut their production. It is expected that OPEC output in fact will reach its highest in recent history, as Iraq boosted northern exports and Libya reopened some of its main oil terminals. The main concern of Mr. Sechin is that the price rise that results from either an actual freeze or the discussion thereof would improve conditions for shale producers in North America, who seem to be in the position to benefit most from actions by OPEC. Rosneft is responsible for 40% of Russia’s crude oil output. Lukoil and GazpromNeft are the second and fourth biggest oil producers in Russia respectively. Russian officials have not yet commented on the position of Rosneft, GazpromNeft and Lukoil.
Olesya Astakhova, 2016. Russia’s Rosneft Boss Sechin says no to OPEC oil cap. Reuters, October 11, 2016.
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21st October 2016
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BRICS Summit in Goa: Rosneft Acquires New Assets
On the 15th of October, a consortium led by Rosneft comprising the Dutch commodities giant Trafigura and United Capital Partners (UCP) agreed to buy oil refining and port assets from India’s Essar Group, which is the second large oil refining company in India (supplying 20 million tons per year and 9% of the local market for refined products). This deal takes place at the premises of the of the BRICS Summit in Goa, India. The deal will give Rosneft a 49% stake in Essar Oil. Another 49% stake will be split equally between Trafigura and UCP in order to avoid the western sanctions against Russia that are currently in place. Essar oil is present in several fields; oil, gas, steel, ports, and power. However, in later years it is has accumulated a substantial debt burden. The Indian market for refined oil is set to grow in the coming years, in relation to this fact Essar's 20-million-ton refinery in Gujarat and its retail fuel outlets in India are seen as strategic investment for Rosneft in this dynamic market. In fact, India is one of the most promising and quickly growing markets of the world. Moreover, the deal opens perspectives on other markets of the Asia Pacific region such as Indonesia, Vietnam, Philippines and Australia.
Douglas Busvine and Denis Pinchuk, 2016. India's Essar agrees to sell oil arm to Rosneft-led group. Reuters, 16 October, 2016.
Simon Mundy, 2016. Mumbai, Rosneft Leads $13bn purchase of Essar OIl. Financial Times. 17 October, 2016.
The Dismantling of North Sea Oil Wells
Many offshore oil-rigs in the North Sea are nearing an end in production and their reserves are depleting. The lower the reserve levels get, the more expensive the rigs are to keep in production. Added to this is the low price of oil, which means that a third of oil fields in the North Sea are operating at loss levels. Many rigs are now being shut down, but the decommissioning is not so simple. The structures must be removed. According to the protocol signed by 15 countries called the Convention for the Protection of the Marine Environment of the Northeast Atlantis, or OSPAR, offshore platforms must be removed and not simply shutdown. Simply shutting them down means that they may rust and disintegrate and lead to damage to marine ecosystems. OSPAR, which came into place after a battle between Greenpeace and Shell in 1995, demands that the topside of the structure must be dismantled and recycled. Only in certain cases of rigs weighing more than 10,000 tons or having been built prior to 1999, can much of the rig be left in place. In those instances, oil companies must dismantle the top portion so that sea vessels can freely move over the structure. Removal of any of the rigs is extremely difficult, however, as they are built to withstand hurricane force winds and very turbulent waters. There are currently 470 oil and gas rigs and 5,000 wells that need plugging with cement. The first step in decommissioning is plugging the seabed wells and then there are three major options to remove the structure. All processes involve the removal of the metal top structure and subsequent recycling. It is in this step that new technologies are coming into play. Technologies involving high pressure, abrasive water jets, hydraulic shears, and diamond saws. Some even involve robot submarines and remotely operated vehicles. The most efficient method is for now very much still in research phases. This involves the use of lasers, which would consume less power and are much more feasible in terms of weight of machinery. The future of these technologies will be instrumental in offshore wind turbines in the future. Since OSPAR covers any man-made structures that may adversely affect marine life, wind turbines will also need to be serviced and disposed of in the future. Paul Marks, 2016. What It Takes to Dismantle an Oil Rig. BBC.com. 5 August, 2016.
Iran Opens an International Tender on its Oil and Gas Fields
Iran opened the bidding application process for foreign companies willing to explore its natural resources for the first time since the sanctions have been lifted a year ago, hoping to attract up to 150bln USD of investment by 2020 and get a boost in oil production.
The Associated Press,2106. Iran to Invite Foreign Companies to Bid on Oil and Gas. The New York Times. 16 October, 2016.
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ENERPO NewsletterVolume 3 Issue 6
21st October 2016
Irina Mironova Michael Camarda Aaron WoodElisabeth NguebanaGlenda PavonAlberto PeregoAlexander GeysmanBogdan PolishchukDaniel TsvetanovKelsey Zimmerman
ENERPO program http://www.eu.spb.ru/en/international-programs/enerpo ENERPO Twitter account https://twitter.com/ENERPO_EUSP Workshop Series videos http://www.youtube.com/user/EUSPchannel ENERPO Journal online http://enerpojournal.com/
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asking respondents whether they would favor nuclear energy use if it meant their energy costs were the same or less than they would otherwise be that month. 67% answered “yes” while 32% answered “no”.
Moving forward, Japanese leadership will have to balance the varying interests at home, as well as those of potential partners in developing the gas hydrate resources, as foreign countries and inevitably, foreign companies, get involved in the process. As of yet, research is still being conducted regarding the viability and environmental safety of gas hydrate production. At best, it could be a convenient new source of transitionary fuel, and at worst, another environmental catastrophe waiting to happen.
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